Which of the following is a real option with respect to a capital budgeting decision?
A) A call option on the company's stock.
B) A put option on securities sold to finance the project.
C) An option to expand the scale of the project.
D) An option to purchase land that will be used for a manufacturing facility.

Question

Quizplus · Accepted Answer

Real options in capital budgeting refer to the flexibility a company has to make future decisions that can affect a project's cash flows. An option to expand the scale of the project is a real option because it allows the company to increase the project's size if conditions are favorable.

Which of the Following Is a Real Option with Respect